This Day in Crisis History: Sept. 17, 2008

This September, MoneyBeat will take a daily look back at the developments surrounding the collapse of Lehman Brothers and the financial crisis that followed. Each day, we will recap the events of the corresponding day in 2008, as the worst crisis in 80 years built to its terrible climax.

Sept. 17, 2008

Chaos continued to reign on Wall Street and across the world’s financial centers.

In one of the more panicked reactions, Morgan Stanleybegan merger talks with Wachovia Corp., as Morgan Stanley shares dropped 24% to a 10-year low. Word of the discussions followed Merrill Lynch’s deal with Bank of America Corp. earlier in the week, as investment banks sought the protection of the relatively safe deposit-taking banks.

In a memo to employees in the middle of trading Wednesday, CEO John Mack asked: “What’s happening out there? It’s very clear to me — we’re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down.”

Across the pond, Lloyds TSB Group agreed to acquire HBOs PLC in a government-brokered deal, WSJ reported.

Through it all, the stock market plummeted. A 449-point sellofftook the Dow Jones Industrial Average to its lowest level in almost three years, leaving it 23% below where it stood the year before. Indexes abroad fell sharply and Russia halted all trading for the second straight day.

“Forget about retail investors, all the pros are scared,” one broker told WSJ. “People have no idea where to put their money.”